When Joaquin Cortes strutted on to the world stage in the early 1990s, flamenco entered an era of celebrity flash. Although he had started out as a natural dance talent, Cortes increasingly appeared to be on a blatant quest for rock-idol status. When he performed, bright lights haloed the sweat that sprayed from his naked torso, while giant video screens beamed his dark, predatory features to the back rows of his adoring fans.

Now, 21-year-old Juan Manuel Fernandez - aka Farruquito - is poised to succeed Cortes as flamenco's El Guapo, or handsome one. Officially crowned by People Magazine as one of the world's most beautiful people, Farruquito looks even more the prototype of the Gypsy king: long black hair tousles his fiercely chiselled cheekbones; his slender body moves with a remote, aristocratic grace. Yet Farruquito showcases his beauty in a very different manner from Cortes. While the latter flaunts his style and sexiness with showbiz glitz, Farruquito is being hailed as a reincarnation of old flamenco. The contrast between the two dancers couldn't be more extreme - and it has pushed them to the heart of a debate that is dividing flamenco between purists and modernisers.

For centuries the songs and dances of flamenco were performed in village squares and cafes. But as the art form slowly entered mainstream theatre in the past century, a new generation rapidly yoked it to a whole range of contemporary idioms: besides Cortes's rock-accented version, the new scene also boasts gay flamenco, modern-dance flamenco and jazz flamenco.

These new practitioners argue that flamenco will die unless it changes, and that all artists have a right, even a duty, to reinvent their form. The high-profile pioneer Sara Baras is desperate to widen the vocabulary into a more inclusive style of dance theatre, saying that: "Flamenco is one of the most emotional arts - but what's been missing from it is a grand concept."

Yet while Baras prides herself on taking her art into the future, Farruquito is making waves because he is looking determinedly to the past. In fact, when I meet him in Barcelona, where his show Alma Vieja has just finished a run, he tells me that he doesn't even feel "part of the 21st century. I am more interested in learning from my elders." His gods are the dancers and musicians who worked with his grandfather, the great El Farruco. They embody for him "the one way, the truth of flamenco". It's not that Farruquito wants to ape the way that generation danced - "I have my own body and my own heart and my own life," he insists. It's that he aspires to the spirit they embodied: duende.

It was the poet Federico Garcia Lorca who famously appropriated duende as the defining term of flamenco, identifying it in the "jet of blood" in a singer's voice or the knife blade in a dancer's feet. While some performers used to induce it through drink or drugs, in its pure form duende is identified as a state of possession - a spirit of ancient lawlessness, passion and pride that passes from flamenco's Gypsy ancestry into the performer.

Many purists believe that duende can flourish only on the unpretentious stages found in old cafes, and in the rhythms of traditional dances like the alegrias and farruca. This is the reason Baras's efforts get dismissed as "ballet with stamping", and Cortes's celebrity spectacles have been resented as vulgar misrepresentations of the art.

Farruquito has been reported to share these opinions. In an interview published on the internet he is quoted as saying that he doesn't like "other dancers". This he flatly denies - "I never said that, I respect other people's work" - but the simplicity of his current show, Alma Vieja, speaks for itself. The stage may be beautifully lit, but the material has none of the artfully choreographed ensembles that bulk out contemporary productions. And there are only five singers and two guitarists, whose music bears no traces of rock, jazz or Latin beat: only a very direct homage to the old Spanish style.

Extreme aficionados claim that duende can be possessed only by performers who - like Farruquito - have real Gypsy blood; outsiders, they argue, can at best perform a kind of translation. Farruquito again distances himself from the hard line, claiming that the classes he teaches in Seville are full of talented dancers from all over the world. But he has to admit that his Gypsy lineage has helped to form him: "It's easier to have all around you the tradition and the style of life."

Even now Farruquito's family adheres closely to Gypsy culture. When his father died nearly three years ago, Farruquito mourned in accordance with tradition, retiring from the stage, wearing black and not shaving. His show continues that family homage, paying tribute not only to his grandfather (with whom he started dancing at the age of five) but other performing members of the tribe - his great grandmother and both his parents.

Almost half the show's cast are relatives too, and when I arrived at the theatre I found yet more family backstage. Two little girls and a baby were playing in an adjoining dressing room and various girlfriends and elderly women kept arriving. The interview had been scheduled for just before the show and I began to worry I was keeping Farruquito from warming up. He reassured me that the backstage party was itself the warm-up. Like most Gypsy dancers Farruquito doesn't bother with stretches or a barre. He simply prepares himself to be inspired - which may involve sitting alone in a corner or joking and singing with the musicians.

He finds it very hard to explain what this inspiration involves. "Dance is a magical thing. I think it is something in life that has chosen me and that plays with me. I take my inspiration from anywhere but in the end it is all about the feeling I communicate to the audience. You have to see a lot of flamenco to know when someone has it."

As it turns out, all I had to do was watch Farruquito. As a dancer he sets a different standard. In the fast drumming zapateado his feet orchestrate an impossible dynamic range while his arms coil an exquisite counterpoint. Unusually for a male flamenco dancer he has a very supple, responsive torso and while he can focus his dancing down to one ferocious, vibrating column, he can unleash it to a bending, curving abandon I've never seen before.

Even more riveting, though, is the concentration with which Farruquito gives himself over to his "magic". Often he seems oblivious of his audience as he lifts his face to hear some invisible music, or scent some invisible drama. When he slowly raises his arms and regally clicks his fingers the theatre holds its collective breath, waiting for the storm to come coursing down through his body.

It is this authority that makes Farruquito such a potent argument against publicists trying to rebrand flamenco as a dance for the young and fashionable. The "magic" that Farruquito invokes can just as easily hit on the old, the fat, the bald and the ugly. It can also hit on the very young, as Farruquito proudly demonstrates through the example of his six-year-old brother Manuel.

Manuel gives only one cameo performance in Alma Vieja, and he needs some coaxing to scamper on stage. But once he is dancing his plump little shoulders square up with a bullish authority, his arms lift with precocious grace and his tiny feet pound the stage in a rhythmically flawless riff. Farruquito assures me that "no one told him to put his hands like this or move his feet like that". It may be Gypsy blood, it may be the family connection, it may be God-given talent. Yet this microdot of duende already has the same eerily inspired quality as his big brother, with a capacity to wring emotional cries from aficionados.

When I watch these Fernandez boys, the purist position makes total sense. This is a product that has no use for fancy design or fusion music. Yet such is their talent that the arguments start to seem irrelevant. Farruquito and Manuel could dominate any stage - modest or glitzy - and the point about duende is that it's a free spirit. No one can legislate where and how it shows up - least of all the fans and critics.

· The Flamenco Festival is at Sadler's Wells, London EC1 from February 5, Alma Vieja from the 15th. Box office: 0870 737 7737.